Recreational Cannabis News

Nevada recreational marijuana sales reach $33M in August

by Colton Lochhead Las Vegas Review-Journal

Nevada dispensaries sold more than $33 million in recreational marijuana and the state pulled in nearly $5 million in total taxes in August, according to numbers released by the Nevada Department of Taxation Monday.

That’s up from the $27 million in sales and $3.7 million in taxes in July, the state’s first month of recreational weed sales.

The recreational sales numbers were significantly ahead of the state’s projected $21.5 million in sales for August. In fact, the state did not project any month in the first year of recreational sales to eclipse $28 million.

Andrew Jolley, CEO of The+Source dispensaries and president of the Nevada Dispensary Association, said those projections will likely prove to be fairly conservative, and expects the market to continue to grow steadily over the next several months.

“I think it is a good indication that there was a large, pent-up demand that was being served by the black market,” Jolley said.

The August tax numbers broke down like so:

$3.35 million generated by the 10 percent sales tax on recreational marijuana (up from $2.71 million in July)

$1.51 million generated by the 15 percent wholesale tax at the cultivation level on all marijuana (up from $974,060 in July)

State Sen. Tick Segerblom, D-Las Vegas, also known as the godfather of pot in Nevada, said he was initially a little worried that the novelty of legal marijuana could lead to a drop off in the second month of sales.

But after talking to the industry, he said it was clear that wasn’t going to be the case for August.

“Obviously there’s a demand,” Segerblom said.

And Segerblom said he doesn’t think the sales and tax numbers will level off for at least two years, and pointed to the recent opening of five dispensaries in Henderson.

Segerblom also heaped the praise onto the industry as well as the state regulators for ensuring the market got off to a smooth start.

“Everyone’s just been really been working perfectly together,” he said.

In the most serious legal challenge to date against Colorado’s legalization of marijuana, two neighboring states have asked the U.S. Supreme Court to strike down the history-making law.

Nebraska and Oklahoma filed the lawsuit directly with the nation’s highest court on Thursday. The two states argue in the lawsuit that, “the State of Colorado has created a dangerous gap in the federal drug control system.”

“Marijuana flows from this gap into neighboring states, undermining Plaintiff States’ own marijuana bans, draining their treasuries, and placing stress on their criminal justice systems,” the lawsuit alleges.

Colorado Attorney General John Suthers said in a statement that he will defend the state’s legalization of marijuana, saying that the lawsuit is, “without merit.”

“Because neighboring states have expressed concern about Colorado-grown marijuana coming into their states, we are not entirely surprised by this action,” Suthers said. “However, it appears the plaintiffs’ primary grievance stems from non-enforcement of federal laws regarding marijuana, as opposed to choices made by the voters of Colorado.”

Colorado voters in 2012 passed Amendment 64, which legalized use and limited possession of marijuana by anyone over 21. The new law, tied for the first in the nation to widely legalize marijuana at the state level, came after more than a decade of legal use and possession of marijuana in Colorado for certain medical purposes.

Stores able to sell up to an ounce of marijuana to any adult with a Colorado I.D. — or a quarter ounce to any adult with an out-of-state I.D. — opened on Jan. 1 this year. So far, recreational marijuana stores in Colorado have made more than $300 million in sales in 2014. The lawsuit does not target Colorado’s separate medical marijuana system, where registered patients must be Colorado residents.

Nebraska and Oklahoma’s complaint argues that Colorado does not have authority to pass laws that conflict with the federal prohibition on marijuana. Doing so, the states claim, violates the Supremacy Clause of the U.S. Constitution.

“Colorado Amendment 64 obstructs a number of the specific goals which Congress sought to achieve,” the lawsuit states.

But much of the complaint focuses on harms the two states say have come to them as a result of legal pot sales in Colorado. The lawsuit says the states have suffered increased costs from arrests, the impoundment of vehicles, the seizure of contraband, the transfer of prisoners, and other problems associated with marijuana — which is strictly illegal in the two states — flowing into Nebraska and Oklahoma. The states say the problems amount to “irreparable injury.”

News stories since Amendment 64’s passage have repeatedly noted the complaints of law enforcement officers in neighboring states that marijuana legalization in Colorado is straining their budgets. For instance, the police chief in Sydney, Neb., told a television station this year that half of his department’s traffic stops now result in a marijuana arrest. He said the department burned through its yearly overtime budget in six months, mostly paying officers overtime to go to court to testify in marijuana prosecutions.

Another Nebraska television station reported this year that, while the state’s highway patrol has not seen a jump in marijuana citations, it seized nearly twice as much suspected drug money in 2014 as in 2013. Late last year, a spokesman for Oklahoma’s Bureau of Narcotics and Dangerous Drugs told The Denver Post that Colorado marijuana has earned a reputation for potency in his state.

The lawsuit argues that Colorado also has done little to keep pot from leaving the state. Marijuana customers are not subject to criminal background checks and their purchases are not tracked, the lawsuit notes.

“Nebraska taxpayers have to bear the cost,” Nebraska Attorney General Jon Bruning said at a news conference Thursday, in comments reported by the Omaha World-Herald. “We can’t afford to divert resources to deal with Colorado’s problem.”

“Fundamentally,” Oklahoma Attorney General Scott Pruitt said in a statement, “Oklahoma and states surrounding Colorado are being impacted by Colorado’s decision to legalize and promote the commercialization of marijuana which has injured Oklahoma’s ability to enforce our state’s policies against marijuana.”

It is unclear whether additional states will join the lawsuit, which could have implications for more than a dozen other states across the country with recreational or medical marijuana laws, as well as those states’ neighbors. A spokeswoman for the Kansas attorney general’s office said the state is “assessing our options.” Meanwhile, the attorney general in Washington state, which also in 2012 legalized marijuana for adults, stood by Colorado. Attorney General Bob Ferguson said in a statement that he would, “vigorously oppose any effort by other states to interfere with the will of Washington voters.”

Colorado Gov. John Hickenlooper earlier this year proposed hiring two analysts to track out-of-state marijuana diversion, something that ultimately wasn’t funded. In an interview Thursday, Hickenlooper said he has talked with officials from Nebraska and Oklahoma about their concerns and how to address them.

“I’m not sure filing a lawsuit is the most constructive way to find a solution to whatever issues there are,” he said.

Legal analysts also expressed skepticism about the lawsuit.

“Congress can’t force states to criminalize marijuana,” Vanderbilt law professor Robert Mikos, an expert on the intersection of federal power and state marijuana laws, wrote in a blog post. Oklahoma and Nebraska “cannot simply force Colorado join their fight,” Mikos wrote.

University of Denver law professor Sam Kamin wrote in an e-mail that the lawsuit does not mount much of a challenge to Colorado’s ability to legalize marijuana use or possession. Rather, it focuses mostly on the commercial sale and state regulation of pot — meaning, even if it is successful, it might not entirely strike down Amendment 64 but could lead marijuana stores to close.

Brian Vicente, an attorney who was one of Amendment 64’s chief proponents, charged that the lawsuit is “largely without merit.”

Likewise, other legalization advocates blasted the lawsuit. Mike Elliott of the Marijuana Industry Group said the lawsuit, if successful, could lead to a resurgent marijuana black market. Mason Tvert, another of Amendment 64’s proponents, said Nebraska and Oklahoma are “on the wrong side of history.”

“It’s unfortunate the state of Nebraska is trying to dictate the laws here in Colorado,” Tvert said.

But groups opposed to legalization cheered the lawsuit. Mark de Bernardo, the executive director of the Institute for a Drug-Free Workplace, said state marijuana legalization violates not only the U.S. constitution but also international treaties to which the United States is bound. Kevin Sabet, a co-founder of the national group Smart Approaches to Marijuana, said legalization of marijuana “is not implemented in a vacuum.”

“Colorado’s decisions regarding marijuana are not without consequences to neighboring states, and indeed all Americans,” Sabet wrote in a statement.

John Ingold: 303-954-1068, jingold@denverpost.com or twitter.com/johningold